Impacts of greening measures and flat rate regional payments of the Common Agricultural Policy on Scottish beef and sheep farms

Abstract

SUMMARYThe latest Common Agricultural Policy (CAP) reforms could bring substantial changes to Scottish farming communities. Two major components of this reform package, an introduction of environmental measures into the Pillar 1 payments and a move away from historical farm payments towards regionalized area payments, would have a significant effect on altering existing support structures for Scottish farmers, as it would for similar farm types elsewhere in Europe where historic payments are used. An optimizing farm-level model was developed to explore how Scottish beef and sheep farms might be affected by the greening and flat rate payments under the current CAP reforms. Nine different types of beef and sheep farms were identified and detailed biophysical and financial farm-level data for these farm types were used to parameterize the model. Results showed that the greening measures of the CAP did not have much impact on net margins of most of the beef and sheep farm businesses, except for ‘Beef Finisher’ farm types where the net margins decreased by 3%. However, all farm types were better off adopting the greening measures than not qualifying for the greening payments through non-compliance with the measures. The move to regionalized farm payments increased the negative financial impact of greening on most of the farms but it was still substantially lower than the financial sacrifice of not adopting greening measures. Results of maximizing farm net margin, under a hypothetical assumption of excluding farm payments, showed that in most of the mixed (sheep and cattle) and beef suckler cattle farms the optimum stock numbers predicted by the model were lower than actual figures on farm. When the regionalized support payments were allocated to each farm, the proportion of the mixed farms that would increase their stock numbers increased whereas this proportion decreased for beef suckler farms and no impact was predicted in sheep farms. Also under the regionalized support payments, improvements in profitability were found in mixed farms and sheep farms. Some of the specialized beef suckler farms also returned a profit when CAP support was added.

EU‐wide Economic and Environmental Impacts of CAP Greening with High Spatial and Farm‐type Detail

“…This reduction is frequently of the magnitude of up to 2–3% (e.g. Solazzo et al ., ; Cortignani and Dono, ; Vosough‐Ahmadi et al ., ). This reflects the fact that most of these studies do not account for market price effects of CAP greening which according to our results off‐sets the productivity reduction caused by greening.…”

“…While some studies focus on a specific farm type (e.g. tomato farms in Solazzo et al ., ; beef and sheep farms in Vosough‐Ahmadi et al ., ) others cover a wider range of farm types (e.g. all farm types in the study region in Czekaj et al ., ; or Solazzo and Pierangeli, ).…”

“…Czekaj et al, 2014;Cortignani and Dono, 2015) or an individual (real) farm model (e.g. Louhichi et al, 2015;Solazzo et al, 2015;Vosough-Ahmadi et al, 2015;Solazzo and Pierangeli, 2016) is used. The greening measures target land allocation at farm level implying that their eligibility and uptake largely depend on farm-specific characteristics (e.g.…”

“…Czekaj et al, 2014;Cortignani and Dono, 2015;Mahy et al, 2015) or allow farmers to choose the level of (non-) compliance (e.g. Louhichi et al, 2015;Vosough-Ahmadi et al, 2015;Solazzo and Pierangeli, 2016;Cortignani et al, 2017). In the first case the authors implicitly assume that the penalty of non-compliance is sufficiently high to fully deter any deviation of farmers' behaviour (production choices) from the greening requirements.…”

Income Mobility and Income Inequality in Scottish Agriculture

“…Within Scotland, the move from historic to area‐based direct payments in the new CAP will inevitably redistribute support in future from farms with more intensive enterprises towards those with more extensive systems (see, e.g. Vosough Ahmadi et al ., ). However the Scottish Government has sought to limit the resultant scale of farm income redistribution by adopting a regionalised model in which regional payment rates reflect the productive capacity of land (Scottish Government, ).…”